Monday, July 10, 2006

Carrots and Sticks

Sebastian Mallaby has a pointed op-ed in today's Washington Post on the political class' embrace of the technology that will create new sources of energy in the future, and their failure to discuss regulatory measures that will create stronger incentives for these very technologies. Mallaby argues that you can't really have one without the other:

We already have technologies to cut carbon. Hybrid cars have been around for years, but almost nobody drives them. Small cars have been on the market even more years, but they aren't consumer hits either. There are dozens of technologies to insulate buildings and design heating and cooling systems in efficient ways. The problem is we don't use them.

You can even cut carbon using no technology whatever. Mexico City has reduced its output of carbon dioxide by almost 55,000 tons a year by opening one efficient bus route; the key innovation here was the creation of two bus lanes. The new buses run on diesel -- not exactly a technological breakthrough. But because they are rapid and frequent, the buses have brought car use down and reduced emissions.

So what matters is not just the technologies we have but the incentives to deploy them. The average Western European uses half as much energy as the average American, and that's not because there's more technology in Europe. Rather, Europeans have embraced anti-carbon policies ranging from gas taxes to emissions caps, from an absence of extravagant mortgage subsidies that encourage super-size homes to congestion charges for drivers in London and Stockholm.

Those taxes, Mallaby argues, are the very things that push new technologies past a tipping point: he notes, for instance, that Norwegian oil companies are sequestering carbon dioxide on the ocean floor in response to European emissions caps, but drillers in the US have little incentive to follow suit. While many might have a problem with that particular example, as carbon sequestration is still problematic, the broad point is well-taken: the energy transition needed in this country and globally won't happen without making the production and consumption of energy that emits greenhouse gases a bit more painful. A carbon tax, with an accompanying cap-and-trade system, is probably long overdue in the US. Similarly, we probably need to institute both carrots and sticks to address energy consumption: combine higher taxes on polluters like gasoline with tax credits for efficiency (more efficient cars and buildings, for instance), and things could start to change quickly. We don't have to do these things all at one time (and probably shouldn't), and should definitely make them revenue-neutral (balance a higher gas tax, for instance, with a lowering of payroll taxes), but it's likely time that we started internalizing the costs of using dirty energy wastefully (the current MO).

Of course, we also have to insist on honest rhetoric: hydrogen cars are decades away from commercial viability, while we already have hybrids. Biofuels won't provide a permanent solution, but they can certainly help us make a transition to more long-lasting changes. Sun and wind power will work in certain areas of the country, as will wave and geothermal power. Efficiency technologies from insulation to compact fluorescent light bulbs are here. If we focus on both side of the pain-pleasure continuum by rewarding positive behavior with economic incentives while punishing waste and inefficiency through higher taxes, we can get a start on addressing critical issues of sustainable supplies of energy and climate change right now... We've got to see some political will, though.